Pension Alert - September 2018

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Hogan Lovells pension group is delighted to send you our September e-newsletter.                                                                

                        In this newsletter you will also find:                        

  • Three pension news stories;
  • Links to our pension news updates;
  • Dates for your diary; and
  • Client briefings – including new briefings "IORP II: what does it mean for UK pensions?" and "Pension transfers and scams: what should trustees do?"

 

PENSION NEWS STORIES

DC chair's statement: is yours compliant?          

The Pensions Regulator has high expectations of the contents of the annual chair's statement, which has to be prepared by trustees of most defined contribution (DC) schemes within seven months of the end of each scheme year.  Guidance issued by the Regulator in June, and reissued earlier this month sets out in considerable detail the information it expects to see.  In many cases, this goes well beyond the statutory requirements contained in the scheme administration regulations.

For example, in relation to trustees' knowledge and understanding, the regulations require trustees to describe how the requirements have been met during the scheme year and to explain how the  trustees' combined knowledge and understanding, together with advice available to them, enables them properly to exercise their functions as trustees.  The guidance expects the statement to describe (among other things) how the trustees have demonstrated throughout the scheme year:

  • in relation to trustees' knowledge and understanding, the Regulator expects the statement to confirm there is an appropriate induction process in place for new trustees, and to provide specific details of the training in place for existing trustees.  Statements which simply confirm the requirements have been met without providing details are likely to be found in breach;
  • in relation to the requirement to provide the statement of investment principles for the default arrangement, simply confirming it is available on request is not sufficient; and

  • in relation to the requirement to explain how the trustees have met the requirements for processing core financial transactions, the Regulator expects trustees to provide details about the processes in place (for example what Service Level Agreements (SLAs) do you have with the administrator).  Statements which simply confirm that the core financial transactions requirements have been met without providing any details are likely to be found in breach.

Where the Regulator is of the opinion that trustees have not prepared a statement in accordance with the requirements, it is obliged to issue a mandatory penalty of between £500 and £2,000.  In the second quarter of this year the Regulator issued 121 mandatory penalty notices.  Of these, 74 were subsequently revoked.

Trustees who have provided chair's statements in the past need to understand that the requirements are being interpreted by the Regulator in a far more stringent manner than previously.  We recommend that such trustees check the guidance carefully to ensure that their statement meets all the Regulator's expectations.  We will be pleased to review, or help draw up, suitable statements.

 

GMPs: equalisation judgment expected soon

Judgment in the Lloyds Bank case on equalisation of guaranteed minimum pensions (GMP) is expected this autumn.  If the High Court confirms that GMPs must be equalised between men and women, the implications for many schemes especially in relation to administration may be significant.  We will be alerting clients when the judgment is handed-down, and providing advice about suitable next steps.
 

PPF: contingent assets – will you need to re-execute your documents?                        

In January this year, the PPF re-issued its standard documentation for Type A (guarantees) and Type B (security) contingent assets.  For the 2018/19 levy year, the PPF continued to recognise existing Type A or B contingent assets which used the previous standard documents (provided that other formalities were met).                      

For the 2019/20 levy year, Type A and B contingent assets which include a fixed cap will need to be re-executed on the new standard forms by the end of March 2019 to continue to be recognised for the PPF levy. More information (plus confirmation of the need to re-execute) is expected from the PPF later this year.  We are monitoring developments and will be in touch with clients who may be affected.
 

NEWS UPDATE

Please click Latest News for summaries of the most recent legislative and regulatory developments in pensions and new pension case law.       

For information on developments over the past 12 months, please visit our online Pension Planner, where you will find summaries arranged by topic and by time period in force (or expected in force).             
 

DATES FOR YOUR DIARY

28 September 2018  trustee training day
A full day seminar aimed at new or inexperienced trustees, or those who would like a refresher, covering all legal aspects of the Pension Regulator's trustee knowledge and understanding syllabus. For an invitation and to book a place, click here.

14 November 2018 recent developments in pensions
Our informal breakfast seminar aimed at trustees and sponsors of occupational pension schemes and their advisers. Speakers from the Hogan Lovells pension team will review legal developments over the past few months and will explain the practical implications for pension schemes. For an invitation and to book a place, please click here.

For details of our future events, please see our client training programme 2018 and our client programme for the first half of 2019.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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